As the holidays approach, more Americans will be on the road this year – with 115.6 million estimated to travel from December 21st through year-end. Many will take advantage of this opportunity to tour homes and condominiums for sale in hopes of finding that ideal vacation property to acquire.
Rental income can assist vacation property ownership costs financially. The National Association of Realtors® (NAR) estimates that 20.5 percent or more of the U.S. housing stock is for recreational, seasonally or occasional use, i.e. vacation properties. NAR’s past surveys have found that 30 percent of vacation homeowners plan to rent their properties over the short-term. Among owners of vacation properties that classify themselves as investment buyers, that increases to 45 percent.
With renting of a vacation property at least part time in mind, vacation property management company Vacasa examined the best places to purchase a winter vacation property based on income and returns. Vacasa is a vacation-home property management company proving management and brokerage services for buyers, sellers and owners of vacation properties across the U.S. Their web site says they are the largest vacation rental management company in the U.S.
The following table shows their top picks of winter vacation home locations featuring the greatest capitalization rate. In appraisal terminology, value is equal to net income divided by an overall capitalization rate. Net income is equal to gross income minus operating costs (management fees, taxes, insurance, maintenance related expenses). Requirements to the Vacasa study on identifying the best places to buy a winter home (in addition to the annual return from renting) included being a “short drive from major population centers,” and having “summer opportunities for hiking-biking-kayaking….”
To view the entire study click https://www.vacasa.com/top-markets/2019-best-places-to-buy-winter-vacation-home
To learn more about Vacasa go to www.vacasa.com or for those looking for more turnkey property management services for their current or prospective vacation home click https://www.vacasa.com/property-management
While other sites help lease your vacation property, such as VRBO, you or someone else still has to manage, clean and repair – which is an indirect added expense. For those interested in doing those functions on their vacation rental property click https://www.vrbo.com/lyp?
My view is that many of the best winter vacation homes are based in warmer climates drawing those from the colder climes. We own a property in St John, U.S. Virgin Islands where the high season rents (January to mid-April) are 37 percent greater than shoulder season (from April to July 5th and from November to mid-December) and 72 percent greater than summer rents.
In the top-10 destinations above, the yields are very impressive given current rates of return in many alternative investments. In comparison, high-quality corporate bonds today are yielding less than 3 percent, high-yield savings returns are hovering at 2 percent and average Certificates of Deposit are around 1 percent. Between using a vacation home and renting it out, vacation properties can make an attractive investment for many.